Case 1: Aishath Mina Aishath Mina is an entrepreneur in Adh. Maamigili. She is the proprietor of a bakery on that small

[answerhappygod]

Case 1: Aishath Mina
Aishath Mina is an entrepreneur in Adh. Maamigili. She is the
proprietor of a bakery on that small island. Following her
graduation from Cyrx College's MBA program, she decided to take her
business to the next level by purchasing a six-room guesthouse on
her island for MVR 4,000,000. To seek assistance on this subject,
she contacted her financial adviser, Hawa Hana, who counselled her
on the prudent use of equities (30%) and debt (70%) in her
portfolio. Increased use of less expensive debt may result in an
increase in Earnings Per Share (EPS). Additionally, Hawa Hana
advised her to obtain a loan from a financial institution such as
Bank of Maldives (BML) due to the low cost of acquiring funds from
BML. While this increases financial risk, it also increases the
rate of return to equity stockholders. Additionally, she informed
her that the issuance of debt will not erode equity shareholders'
power. Simultaneously, interest on loans is a tax-deductible cost
for purposes of calculating tax obligation. Following consultation
with Hawa Hana, Aishath Mina chose to obtain financing from
BML.
Based on above case answer the following questions:
1. Based on above case identify the concept of Financial
Management advised given by Hawa Hana to Aishath Mina. Justify. (2
marks)